PSE IPO Basics, Updated May 2020.
We will cover the basics of IPO, what is an IPO and how can we participate on (Philippine Stock Exchange) PSE IPO.
What is an IPO?
An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. The transition from a private to a public company can be an important time for private investors to fully realize gains from their investment as it typically includes share premiums for current private investors. Meanwhile, it also allows public investors to participate in the offering. More.
Largest IPOs in history:
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- Alibaba Group ($BABA) in 2014 raising $25 billion
- Softbank Group ($SFTBF) in 2018 raising $23.5 billion
- American Insurance Group ($AIG) in 2006 raising $20.5 billion
- VISA ($V) in 2008 raising $19.7 billion
- General Motors ($GM) in 2010 raising $18.15 billion
- Facebook ($FB) in 2012 raising $16.01 billion
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A company planning an IPO will typically select an underwriter or underwriters. They will also choose an exchange in which the shares will be issued and subsequently traded publicly. Here in the Philippines we only have one exchange which is the Philippine Stock Exchange (PSE).
What is an Issuer?
The company offering its shares is called the “issuer“, it enters into a contract with a lead underwriter to sell its shares to the public. The underwriter then approaches investors with offers to sell those shares.
What is an Underwriter?
An underwriter is any party that evaluates and assumes another party’s risk for a fee. The fee is often a commission, premium, spread, or interest. Underwriters are critical to the financial world including the mortgage industry, insurance industry, equity markets, and common types of debt security trading. A lead underwriter is called a book runner.
Some of the local Underwriters are PNB Capital, who is the underwriter of MerryMart IPO, BPI Capital who underwrite Axelum IPO. An IPO can have multiple underwriters like the AllHome IPO, the company hired UBS AG, Singapore Branch as the offer’s sole global coordinator and joint book-runner. CLSA Ltd. and Credit Suisse (Singapore) Ltd. acted as joint book runners, while PNB Capital as a local lead underwriter, China Bank Capital Corp. also serves as a co-lead local underwriter.
What is Offer Period?
The period of conditionally dealing once the company announces the allocation and price of the stock – this typically lasts for a minimum of three days up to a week depending on the underwriter and issuer, it is linked to the IPO deal settling on the stock market.
A secondary offering is an offering of securities by a shareholder of the company (as opposed to the company itself, which is a primary offering). A follow on offering is preceded by the release of prospectus similar to IPO: a Follow-on Public Offer (FPO).
What is Listing Date?
The date on which shares officially listed on the stock exchange for trading, usually a week or a couple of weeks after the offer period. The stock is identified by ticker symbol or stock symbol its an abbreviation used to uniquely identify publicly traded shares. A stock symbol may consist of letters, numbers, or a combination of both.
Where can I find upcoming IPO listings and follow on offerings?
A company usually announce first its intent to list in the PSE and the exchange will confirm it via disclosures and press releases, IPO process usually takes 5-6 months with the agreement of all parties: Securities and Exchange Commission (SEC), PSE, Issuer, and Underwriter before offering it to the public. The official IPO and FPO listings can be viewed on the website of the exchange PSE EDGE under Listings Notices.
To subscribe to shares you need to have an account with a local stock brokerage house.
- Via your Stockbroker
- Online Trading – Top online brokers trading platform usually has the function to allow their clients to subscribe to IPO allocation. Some online brokers, given the number of their online clients sometimes allocate small amounts or shuffle the shares to their clients if the stock is oversubscribed.
- Broker-assisted Trading – If your account is a traditional/Broker-assisted account, you can simply ask your salesman/broker to allocate shares for you via email/call/text or Instant messaging, this is ideal if you are looking to get a large number of shares as they can get additional shares from the underwriter depending on the demand.
- Via PSE Easy.
- Subscribing to Local Small Investor (LSI) shares thru PSE Easy You need to create an account first then follow these steps:
- Login to PSE Easy with your username and password.
- The ongoing IPO should be under Active events, click the “Subscribe” button on the left side under “Actions“.
- Read the IPO details and indicate the number of shares you want to subscribe to and select the broker you want to use. The maximum limit for an LSI share is up to P100,000 Php only. *Note: you can add multiple brokers in your account given that you have one or more accounts with local stockbrokers. You can find the complete list of Philippine stockbrokers here: PSE Broker Directory.
- Acknowledge and Submit your order, under Subscription Details click the “View” button on the right side click “Print/Download Payment Details“.
- The “Payment Ticket” will show the relevant details of your subscription and the payment instructions. Follow the payment instructions and make sure that the amount and reference numbers are correct when making the payment and settle before the given deadline. You should also receive an email summary about subscription tickets from PSE Easy.
- Once the payment has been received and proceed by the receiving agent you should receive a confirmation email, then PSE Easy will update your account the next day and your shares will be sent to your designated broker, the broker then adds the stock/s to your portfolio.
Note: The stock will only appear on the PSE Easy platform on the offer period.
- Subscribing to Local Small Investor (LSI) shares thru PSE Easy You need to create an account first then follow these steps:
Summary
When a company lists its securities on a public exchange, the money paid by the investing public for the newly-issued shares goes directly to the company (primary offering) as well as to any early private investors who opt to sell all or a portion of their holdings (secondary offerings) as part of the larger IPO. An IPO, therefore, allows a company to tap into a wide pool of potential investors to provide itself with capital for future growth, repayment of the debt, or working capital.
Investing in IPOs is good for the long term if the company has solid growth potential and fundamentals. Short term investors and traders must endure the unpredictable nature of the open market to price and trade their shares. After the IPO, when shares are traded freely in the open market, money passes between public investors. For early private investors who choose to sell shares as part of the IPO process, the IPO represents an opportunity to monetize their investment.
–Don’t forget to subscribe for free newsletters. Thanks. Updated May 21, 2020, Stockbytes PH.
Related Contents:
- Learn more about Stock Basics: Stocks Basic Knowledge.
- What’s your first purchase? If you are still confused better follow this Link: Rules on Stock Investing
- There are dozens of companies listed in the Philippine Stock Exchange: Complete List of Companies
- PSE Trading Schedule: Trading Schedule and Market Phases; Minimum price per stock: Board Lot table
The video below is owned by Philippine Stock Exchange and embed from the PSE Youtube Channel: Resource Speakers: Mr. Bernhard Tsai Chief Operating Officer BDO Nomura Securities Corporation and Mr. John Garcia Assistant Head, Marketing Services Department The Philippine Stock Exchange, Inc.
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